Eleven Individuals Indicted in $1 Million Fraud Scheme Against the U.S. Department of Education

United States Attorney Kenneth L. Wainstein, Inspector General for the Department of Education Lorraine Lewis, and Ellen B. Knowlton, Special Agent-in-Charge of the Criminal Division of the FBI's Washington Field Office announced today that eleven individuals, including four employees of the United States Department of Education, were charged today in a nineteen-count indictment for their participation in a wide-ranging fraud scheme against the Department of Education. The indictment includes charges of conspiracy to defraud the government, theft of government property, receipt of stolen government property, sale of stolen government property, and conspiracy to submit false claims to the government

The indictment is the result of a long-term investigation into fraud at the Department of Education in connection with a large contract that the Department had with Bell Atlantic Federal Systems. Seven individuals, including three former employees of the Department of Education, have already pled guilty to criminal charges during the course of the investigation.

The 64-page indictment charges that the defendants conspired together to defraud the Department of Education by participating in a scheme whereby they would cause electronics items to be ordered on the Bell Atlantic contract and be paid for by the Department of Education, and would then keep those items for their personal use or the use of family members. One of the indicted defendants, Elizabeth C. Mellen, was the contracting officer at the Department of Education in charge of the Bell Atlantic contract. Nine of the remaining defendants are various family members and relatives of Elizabeth Mellon, The final defendant, Maurice Hayes, is an employee of Bell Atlantic who was assigned to the Department of Education.

The indicted individuals are: Elizabeth C. Mellen, 53, of Washington, D.C.; Luther E. Mellen, III., 47, of Washington, D.C.; Philip C. Burroughs, Jr., 27, of Mechanicsville, MD; Tina Burroughs, 25, of Mechanicsville, MD; Elizabeth Burroughs, 26, of Mechanicsville, MD; David Gray, 23,of Mechanicsville, MD; Joanne E. Burch, 57, of Mechanicsville, MD; Joanne C. Murphy, 36, of Mechanicsville, MD; Audrey E. Hawkins, 38, of Mechanicsville, MD; Jeffrey L. Morgan, 28, of Maryland; and Maurice W. Hayes, 53, of Fort Washington, MD. Elizabeth Mellen, Joanne Murphy, Audrey Hawkins, and Jeffrey Morgan are current employees of the Department of Education. Elizabeth Mellen is charged with conspiracy to defraud the government, theft of government property, and conspiracy to submit false claims to the government. Hayes is charged with conspiracy to submit false claims and theft of government property. The remaining defendants are all charged with conspiracy to defraud the United States and receipt of stolen government property. Defendants Philip C. Burroughs, Jr., Tina Burroughs, Elizabeth Burroughs, and David Gray are also charged with theft of government property, and David Gray is charged with one additional count of selling stolen government property.

The indictment charges that, pursuant to the scheme to defraud the United States, Elizabeth Mellen would order various items on the Bell Atlantic contract with the Department of Education, causing the Department to pay for those items. The indictment alleges that she was aided in this effort by technicians employed by Bell Atlantic, including Hayes. Other coconspirators would sometimes order items from Mellen that they wanted her to obtain, and on other occasions she would order there on her own. She would then distribute the items to the other co-conspirators, who would keep them for their personal use, knowing them to be stolen government property. The indictment charges that the items obtained by the co-conspirators in this fashion included a large number of desktop computers, laptop computers, cellular telephones, cordless telephones, Palm Pilot organizers, digital camera and video cameras, and a 61" television. The total value of the goods obtained by the co-conspirators in this fashion exceeds $300,000.00.

The indictment also alleges that the thefts and fraud against the Department of Education were carried out in a number of other ways. For example, it charges that Elizabeth Mellen obtained an Education Department 800 telephone number and caused that number to be routed to the home of Joanne Burch and Joanne Murphy, so that relatives could call them long-distance and the bill would be paid by the Department of Education. The indictment also alleges that defendants Philip Burroughs, Tina Burroughs, Elizabeth Burroughs, and David Gray received Department of Education cell phones from Mellen, and then made hundreds or thousands of personal calls on those phones over a period of months or years, with all of the bills being paid by the Department.

The indictment also charges that Mellen conspired with Hayes and with others to submit false claims to the government. This count charges that Mellen approved large amounts of overtime pay for Hayes and others, to be paid by the Department of Education, for hours they did not actually work. In fact, during these hours, on some occasions the technicians were performing personal services for Mellen, such as driving to Baltimore to buy crabcakes for her, or for other co-conspirators, such as driving them to personal appointments or installing telephone wiring or other equipment at their homes. Other hours that the technicians submitted, and that were approved by Mellen, were never worked at all, 1n return, in addition to the personal services they performed, the technicians assisted Mellen in obtaining the electronics items from Bell Atlantic for her personal use and the use of the co-conspirators, and kept quiet about the fraud scheme. The indictment alleges that the false overtime billed to the Department of Education in this fashion exceeded $700,000.00.

On the charge of conspiracy to defraud the government, the defendants face a maximum penalty of up to five years in prison and a $250,000.00 fine. Theft of government property, receiving stolen government property, and selling stolen government property carry a maximum penalty of up to ten years in prison and a $250,000.00 fine. Conspiracy to submit false claims carries a maximum penalty of up to ten years in prison and a $250,000.00 fine. The defendants will all be arraigned in the near future before United States District Judge Emmet G. Sullivan, who has presided over the earlier guilty pleas in this case.

In announcing the indictment, U.S. Attorney Wainstein, Inspector General Lewis, and Special Agent-in-Charge Knowlton commended the members of the Department of Education Inspector General's Office and the Federal Bureau of Investigation's government fraud squad. In particular, they commended the outstanding work of OIG Special Agent Brian Hickey and FBI Special Agent Thomas Chadwick. In addition, they commended Assistant U.S. Attorney Barbara Grewe of the Public Corruption/Government Fraud section, who is handling the investigation.